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Non-deliverable forward

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Non-deliverable forward
Non-deliverable Forward contracts (NDFs) – also called dollar-settled forwards – are synthetic forwards, which entail no Exchange of currencies at maturity. Instead, settlement is made in US dollars based on the difference between the agreed contract rate at inception and a market reference rate at maturity. NDFs can be used to establish a Hedge or take a Position in one of a growing group of emerging market currencies where conventional Forward markets either do not exist or may be closed to non-residents. As offshore instruments, NDFs Offer the advantage of eliminating convertibility Risk, since no emerging market currencies are exchanged at maturity.
Posted by  Privatebanking.com
 
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